Follow Us

Follow us on Twitter  Follow us on LinkedIn
 

29 May 2013

Commission takes steps under the Excessive Deficit Procedure


Default: Change to:


The Commission recommended that the Council abrogate the EDP for Italy, Latvia, Hungary, Lithuania and Romania. It also adopted Recommendations to the Council with a view to extending the deadlines for correcting the excessive deficit in Spain, France, the Netherlands, Poland, Portugal and Slovenia.


The Commission has today recommended that the Council abrogate the Excessive Deficit Procedure (EDP) for five countries: Italy, Latvia, Hungary, Lithuania and Romania.

The Commission has also recommended that the Council open an EDP for Malta. View

Moreover, the Commission has adopted Recommendations to the Council with a view to extend the deadlines for correcting the excessive deficit in six countries: Spain, France, the Netherlands, Poland, Portugal and Slovenia.

In addition, the Commission has recommended that the Council decides that no effective action has been taken by Belgium to put an end to the excessive deficit and that the Council gives notice to Belgium to take measures to correct the excessive deficit. View

At the moment there is an Excessive Deficit Procedure (EDP) ongoing for 20 EU Member States. This means all EU Member States except Bulgaria, Germany, Estonia, Luxembourg, Malta, Finland and Sweden are subject to an EDP. Today the Commission has proposed to abrogate the EDP forItaly, Latvia, Hungary, Lithuania and Romania. But the Commission has also proposed to open an EDP for Malta. So if the Council follows the Commission's Recommendations, the overall number of countries in EDP will drop to 16.

A decision on the abrogation of an Excessive Deficit Procedure (EDP) is based on a "durable correction" of the excessive deficit. This is deemed achieved if:

(i) the notified data for the previous year (2012 in these cases) show a deficit below 3 per cent of GDP; and

(ii) the Commission services' forecast indicates that the deficit will not exceed the 3 per cent of GDP reference value over the forecast horizon (currently 2013 and 2014)

In cases where the deficit remains close to the reference value and the debt level remains below 60 per cent of GDP, the Commission will also take into account the net cost of the implementation of pension reforms involving the set-up of a mandatory, fully funded second pillar. In particular, the Commission will take into account if the excess over the 3 per cent threshold is fully explained by the net cost of the implementation of the pension reform.

See full press release link below for reasoning behind the Commission's recommendation that the Council abrogate the EDP for Italy, Latvia, Hungary, Lithuania and Romania.

Additional time can be granted to a Member State to correct an excessive deficit, without stepping up the EDP, provided two conditions are met:

  1. There must have been an unexpected economic event with major unfavourable consequences for the Member State concerned by the EDP, meaning that the deadline for correcting the excessive deficit can no longer be met.
  2. The Member State has to have taken "effective action" to comply with the recommendation or notice addressed to it by the Council.

A Member State is considered to have taken effective action if it has acted in compliance with the Council recommendation, regarding both the implementation of the measures required and the budgetary execution. In case the nominal targets are not met, a careful analysis of the structural effort delivered (measured by the change in structural balance, i.e. the budget balance net of the effect of the economic cycle and the impact of one-off and temporary measures) is carried out in order to determine whether the Member State has adopted measures of the magnitude required.

When a Member State has taken effective action but cannot meet the deadline due to unexpected events with major negative consequences for government finances, the Council may decide to adopt a revised recommendation, extending the deadline for the correction of the excessive deficit.

The legal basis is Article 3(5) of Regulation 1467/97. It says that the Council may decide, on a recommendation from the Commission, to adopt a revised recommendation under Article 126(7) of the Treaty on the Functioning of the European Union, if effective action has been taken and unexpected adverse economic events with major unfavourable consequences for government finances have occurred.

Next steps

The Commission recommends that the Council establish 1 October 2013 as the deadline for Spain, France, the Netherlands, Poland and Slovenia to take effective action (i.e. publicly to announce or take measures that seem sufficient to ensure adequate progress towards the correction of the excessive deficit) and to report in detail the consolidation strategy that is envisaged to achieve their respective targets. For Portugal the conditions of the economic adjustment programme apply.

Following the deadline for taking effective action, the Commission will make an assessment of action taken and communicate its findings to the Council. In case the assessment is negative, the Commission will recommend that the Council decide that no action has been taken (Art. 126(8) of the Treaty). In that case, for euro area Member States, the Commission will also recommend the Council to step up the EDP, i.e. to give notice to the Member State concerned (Art. 126(9) of the Treaty).

Full press release

Further information



© European Commission


< Next Previous >
Key
 Hover over the blue highlighted text to view the acronym meaning
Hover over these icons for more information



Add new comment